Stock market trading involves a lot of critical and analytical decision-making. As an investor, you need to have the facts in front of you before you invest your money. This could include data regarding the past performance of the stock, the current factors affecting them and how it is expected to perform in the future. Trade professionals use a variety of candlestick patterns to analyse the market. One of the most common types of candlestick pattern that most traders rely on is the Bearish Belt Hold candlestick pattern. Here’s a guide to help you understand it in detail.
Bearish Belt Hold Definition simplified
A Bearish Belt Hold candlestick pattern consists of two candlesticks in which the first candlestick is bullish while the second one is bearish. For a bearish hold to form, two conditions need to be fulfilled. They are as under:
- The first candle should be bullish while being part of a positive trend.
- The candle should gap up and then close at/near to the close of the previous candle.
Salient features of a Bearish Belt Hold Pattern
The following are the main features of a bearish pattern
1. The bearish candlestick pattern is characterised by a bearish reversal candlestick pattern, which can form anywhere during an uptrend or downtrend. However, for the trader, the key lies in analysing where it is developing.
2. Traders can easily identify the bearish pattern due to a distinct lack or absence of an upper shadow, which is typically prominent in the case of a bullish Belt Hold Pattern.
3. If a bearish hold develops, it signifies the fact that sellers have been able to control the price of the share during the entire trading session since the price of the stock never pusher higher than its opening price.
4. The final characteristic of the bullish pattern is that when trading opens, the price of the share only pushes lower, which is why the upper shadow does not exist in the bearish candlestick pattern. This detail also signifies that sellers have had control during the entire trading session.
Requirements for bearish candlestick pattern
There are three basic requirements for a Bearish Belt Hold pattern to form. They are as under:
1. The Bearish Belt Hold should have a shaven top, which means that an upper shadow should not exist. In case an upper shadow does appear, then it should be minuscule.
2. The price of the share in a bearish hold should close at or near to trading session lows.
3. Typically, bearish belt hold candlestick patterns are identified by their red coloured, real bodies. That said, in certain instances, green coloured real bodies may also form.
Bearish Belt Hold Pattern and markets
Typically, most participants in the share market come from a bullish environment and are positive about the future of the market. This results in a higher pressure on buying stocks than selling them, which in turn results in an ascending market. It is at this point that the first bullish candle is formed of the bearish belt. Now, a new, positive market sentiment starts spilling over the following trading session, thereby leading the market to perform a positive gap. Since the market is now on an uptrend, traders and investors begin anticipating a reversal. As a result of this changing trend, the pressure to sell stocks increases dramatically. This, in turn, ensures that the market covers the gap and ends at or close to the previous bar. Since the market takes back all the gains or profits made during the positive gap, it demonstrates the fact that sellers are now dominating the market and may stay in charge and initiate a bearish trend.
When it comes to Bearish Belt Hold candlestick patterns, you must remember that it is not considered highly reliable since it occurs quite frequently. It is also often inaccurate in predicting the prices of shares. For more details on candlestick patterns and related market advisory services, you can consult our Angel One experts.